Investment Thesis
Brookdale exhibits severe financial distress with negative stockholders equity (-$55.9M), an unsustainable interest coverage ratio of 0.2x, and negative free cash flow of -$25.6M annually. The company cannot service its $4.3B debt burden from operations and is burning cash despite modest revenue growth, indicating a balance sheet that is technically insolvent and facing material refinancing risk.
Strengths
- Modest revenue growth of 2.2% YoY demonstrates operational activity in mature senior living sector
- Gross margin of 28.3% indicates reasonable underlying unit economics before SG&A and interest burden
- Cash position of $265.2M provides near-term liquidity buffer for operations
Risks
- Negative stockholders equity of -$55.9M represents balance sheet insolvency and equity value destruction
- Interest coverage ratio of 0.2x is critically unsustainable - operating income covers only 20% of interest expense
- Negative free cash flow of -$25.6M with capex exceeding operating cash flow indicates ongoing cash burn
- Net income remains deeply negative at -$6.9M with zero YoY improvement and EPS deteriorating 25.8% YoY
- Current ratio of 1.03x reflects extremely tight liquidity with minimal operational stress buffer
Key Metrics to Watch
- Interest coverage ratio trajectory - must move above 1.0x for sustainability
- Free cash flow inflection - needs to turn positive to stabilize balance sheet
- Operating cash flow trend - monitor for further deterioration in cash generation
- Debt refinancing success and maturity schedule - refinancing risk is material
- Net profitability path - monitor cost structure efficiency and pricing power
- Occupancy rates and reimbursement rates - underlying operational drivers of cash generation
Financial Metrics
Revenue
764.9M
Net Income
-6.9M
EPS (Diluted)
$-0.03
Free Cash Flow
-25.6M
Total Assets
5.9B
Cash
265.2M
Profitability Ratios
Gross Margin
28.3%
Operating Margin
6.8%
Net Margin
-0.9%
ROE
N/A
ROA
-0.1%
FCF Margin
-3.3%
Balance Sheet & Liquidity
Current Ratio
1.03x
Quick Ratio
1.03x
Debt/Equity
N/A
Debt/Assets
100.9%
Interest Coverage
0.22x
Long-term Debt
4.3B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T08:06:30.450206 |
Data as of: 2026-03-31 |
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